Insuring Travelers in the Digital Age

INTRODUCTION

When Expedia launched in 1996, few could have anticipated the transformation that this platform would bring to the travel industry. Expedia gave consumers complete control over the booking process, with multiple options available in one place for immediate, online booking. With that leap, Expedia and the online travel agencies (OTAs) that followed in its footsteps launched a trend of technology-driven innovation in the travel industry — a trend that has only accelerated.

In the past 22 years, OTAs and other industry participants—including airlines, hotel chains, car rental fleets, and experience providers—have utilized technological advances to catalyze rapid changes both in how the industry operates and in how customers expect to experience travel. Today, live pricing provides travelers with up-to-the-second information on costs. Bundling flights, hotels, car rentals, and experiences enables all-in-one booking and cost savings. At the leading edge, personal concierge style services give customers one-on-one attention on-site or through websites and mobile apps.

Consumers have responded to these advances by turning to online travel planning in droves. In 2016, global online travel sales topped $564 billion, and are projected to grow to more than $755 billion over the next two years. While final data is not in, it has been predicted that online travel agencies will have overtaken a majority share of the U.S. hotel market in 2017.1

In addition to changing the experience of travel, access to information online allows travelers greater control over their experiences: Nielsen found that the average customer views 28 different websites over 53 days before booking a trip.2 With travelers increasingly invested in the experiences they assemble using the many tools at their disposal, safeguarding these experiences has become even more important.

Yet as the travel industry has evolved, the sector responsible for protecting these highly personalized travel experiences has not kept up with the change. While some elements of travel insurance have become automated, travel insurance has not yet become dynamic in the way the vast majority of the travel industry has. For the most part, the technological and creative platforms used throughout the travel insurance sector deliver only limited selections of static and often irrelevant offers.

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Furthermore, though public attention tends to focus on leisure travel, the same opportunities for transformation exist in the business travel market. Business travel accounts for nearly a third of the estimated $990 billion in annual direct travel spending in the U.S.3 While different, these experiences are equally vulnerable to risks. And fortunately, travelers can still be protected.

There is a clear need for both business and leisure travel insurance to match the pace of the rest of the travel industry. By fusing technological innovation with product innovation, travel insurers can better safeguard customers’ travel experiences. Rapid insights into real world decisions have driven seismic shifts in the broader industry. These changes have the potential to fuel dynamic, responsive travel insurance platforms that can offer the right protection and support to the right person at the right time.

Insuring Travelers in the Digital Age explores the potential to apply nascent technologies such as machine learning, chatbots and artificial intelligence to innovation in travel insurance. In evaluating the potential of these new tools, AIG illustrates its vision of the future travel insurer — seamlessly integrating with distribution partners in order to become an extension of a traveler’s overall experience. With this vision in mind, this paper details ways in which forward-thinking insurers are bringing the travel insurance sector into alignment with the travel industry at large. In the process, these innovators are achieving their core promise to safeguard travelers’ most treasured experiences.